For stocks, one point equals one dollar. So when you hear that a stock has lost or gained X number of points, it is the same as saying the stock has lost or gained X number of dollars.
Using points to describe share price gains, or declines, is generally done to describe short-term results, such as for the day or week.
Although one point always equals one dollar, the percentage value of a one-point movement can be different for two companies. Points refer only to the dollar amount that has changed, not the percentage. Two stocks can lose the same number of points but very different percentages.
Key Takeaways
- When you hear a stock has lost or gained X number of points, it's the same as saying the stock has lost or gained X number of dollars; one point equals one dollar.
- Since points represent actual dollar amounts, two stocks can rise or fall the same number of points—but register different percentage gains or losses.
- These stock points are not the same as basis points for bonds, or currencies.
- Index points are based on the relative movement of the components in the index.
Points Are Not Percentages
Be careful not to confuse points with percentages or basis points (bps). When you hear someone say the stock dropped 10 points, the significance of that drop depends on how high the share price is.
It is important to note that this point and dollar amount refersstrictly to stocks and nothing else. People often talk aboutindexes, bond prices, or currencies being up or down X number of basis points, whichare different. One basis point is equal to 1/100th of a percent, so if someone says the dollar is up 50 basis points, that meansit is up 0.5%.
Example
Let's consider a simple example: If the fictional company TSJ Sports Conglomerate loses four points, dropping from $12 to $8, it would have experienced a 33% drop in the share price. This decline is dramatically different from a four-point drop experienced by a company like Cory's Tequila Co., which is trading at $104. If its stock drops $4.00to $100, the move represents only a 3.8% decline.
Points and Indexes
Points are not just used when discussing individual stocks; they're also often employed to refer to short-term moves in equity indexes, as in "the Dow Jones Industrial Average gained 20 points today" or "the S&P 500 is down 100 points for the week." Because these indexes are dealing with companies that are worth billions of dollars, points work as a kind of shorthand to indicate changes in the collective value. Being able to say, "The Dow was up 100 points," instead of, "The stocks of the companies in the Dow gained $784,356,102.001, give or take a few thousandths," tended to be much less unwieldy.
With indexes, the points still represent dollars, but the ratio is not 1:1. A point is just a whole number in the index value. To understand what the points signify, you need to have an idea of the current value of a stock index.
The significance of a point change is magnified when dealing with stocks that trade at lower levels.
What Are Point Changes in a Stock Index?
When the price of an index rises or falls by $1, it is called a "point." Because an index is composed of many stocks held at various weights, a point move is the result of different stocks in the index rising and falling at varying degree, but with the next effect being a $1 change to the index's overall value.
Why Is Percentage Change Better than Point Change?
Percentage change gives a better reflection of what is happening on an apples-to-apples basis. Say you have two stocks, one trading at $10, one at $100. Given a one point drop, the first falls by 10%, but the second by only 1%. Thus, the point move in the first stock is a much steeper and more severe drop. Because of this, when somebody talks about a stock index rising or falling by X points, be sure to frame it in percentage terms as well.
What Is the Largest Ever Point Drop and Gain in the Dow Jones Index?
The Down Jones Industrial Average (DJIA) fell by 2,997 points on March 16, 2020, in reaction to the the COVID19 pandemic. On the 24th of March, 2020, the Dow saw its largest-ever point gain of 2,113. During March and April of 2020, the market experienced great volatility due to COVID fear and uncertainty. Note the largest percentage drop in the index was October 19, 1987 (known as Black Monday), when the Dow fell over 22.5% in a single day.
FAQs
When you hear a stock has lost or gained X number of points, it's the same as saying the stock has lost or gained X number of dollars; one point equals one dollar. Since points represent actual dollar amounts, two stocks can rise or fall the same number of points—but register different percentage gains or losses.
What does it mean when a stock is up points? ›
Answer and Explanation:
Points mean dollars in the stock market. One point means one dollar in the stock market. Further, stock movement is determined by point movement. Additionally, the stock market shows the performance of the stock on a point basis.
What does X mean in stocks? ›
A Nasdaq stock symbol specifying that it is a mutual fund. A symbol used in stock transaction tables to indicate that a stock is trading ex-dividends or ex-rights.
What is 10 points in the stock market? ›
For example, if a stock index moves up by 50 points, it means the overall value of the index has increased by that amount. Similarly, if a stock's price rises by 10 points, it signifies a $10 increase in its value.
Why do people say points instead of dollars? ›
Because the index deals with companies worth billions of dollars, a simple method of displaying their changes in value was formulated. Thus, Charles Dow used points rather than dollars. The points represent dollars, but the ratio is not 1:1.
How do you know if a stock is peaking? ›
3 Signs of a Market Top
- The number of 52-week highs begins to decline, despite growth in the indexes. ...
- The NYSE advance has peaked and is now declining, even though the S&P and Dow continue higher or have stalled. ...
- The major indexes move below a prior swing low.
A buy point is a price level where the best stocks are most likely to begin a significant advance, based on prior chart activity.
What do the S&P 500 points mean? ›
The price of the S&P 500 index that you see quoted – for example, 4,301.56 – is measured in points, not dollars. That's the weighted average value of all the index's components. As the component stocks move up or down, the index rises or falls according to the calculation.
What is the Dow Jones for dummies? ›
Simply put, the Dow Jones is an index that measures the performance of 30 large, publicly-traded companies listed on the stock exchanges in the United States.
What is x category stock? ›
Companies falling in the X sub-group are traded only on BSE and not on NSE. At times, some companies falling in both the 'X' and 'T' groups might be referred to as 'XT' group companies. The suffix of 'X' signifies that these companies are traded only on BSE and not on NSE.
X Shares means such number of Equity Shares as would result in the percentage shareholding of Investor IV being equivalent to “X” on a Fully Diluted Basis as on the Completion Date.
What does x mean in financial terms? ›
X is the abbreviation or symbol that will appear next to a published bond price to indicate the bond is without interest. When a bond is issued, it typically pays interest to bondholders at regular intervals until it matures. However, the payment of interest is tied to specific dates, known as coupon payment dates.
When should I exit a stock? ›
The decision to exit a large-cap stock should be based on reaching or nearing your financial goal. Even if your target timeframe is 1-3 years away, achieving around 90% of your goal could signal a good time to consider selling. This approach is based on the potential volatility of the equity market.
What are the golden rules of trading? ›
Key Rules from Iconic Traders
Trade with the trend: Follow the market's direction. Do not trade every day: Only trade when the market conditions are favorable. Follow a trading plan: Stick to your strategy without deviating based on emotions. Never average down: Avoid adding to a losing position.
How do points work in trading? ›
What Is A Point? Futures traders usually refer to price movements in terms of points. This is the minimum price fluctuation on the left side of the decimal point. Taking the S&P 500 E-Mini (ES) futures price as an example, a one point move would be if price went from from 1314.00 to 1315.00.
What does X mean at the end of a ticker? ›
It's true that all mutual funds' tickers have an "X" at the end of their symbol. The reason for this is to distinguish between mutual fund tickers and other securities that also have ticker symbols (such as stocks and bonds). This way you will automatically recognize a mutual fund by the X at the end of its ticker.
What is it called when a stock goes up? ›
Bull market: a period of generally rising prices.
What does buy point mean in stocks? ›
A buy point is a price level where the best stocks are most likely to begin a significant advance, based on prior chart activity.
What does it mean when a stock is up? ›
If more people want to buy a stock (demand) than sell it (supply), then the price moves up. Conversely, if more people wanted to sell a stock than buy it, there would be greater supply than demand, and the price would fall.
